๐ŸŽฏ Arbitrage strategies

Scenario: Exploiting inefficiencies between markets

Arbitrage opportunities arise from disparities in interest rates across various DeFi markets. Traders can use Interest Rate Derivatives (IRDs) to exploit these inefficiencies through strategies like spread trading or relative value trades, often requiring less capital than traditional trading.


A trader identifies a temporary discrepancy in borrowing rates between two DeFi platforms. Using interest rate swaps, the trader borrows at a lower rate from one platform and lends at a higher rate on another, capturing the rate spread. This strategy continues to generate profit until the rates converge, allowing the trader to capitalize on market inefficiencies with minimal capital investment.

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